Gold Retreats Back Toward Triangle Support

The price of gold declined slightly in early day trading but largely remains within a consolidation that has been playing out for nearly two weeks.

XAUUSD Oct 24 Hourly Chart

Three Things Driving Gold Right Now

There are three main items that are impacting gold prices at the moment. While a weaker dollar has been underpinning the yellow metal, positive developments in Brexit and trade talks between the US and China and has been suppressing it.

There hasn’t been much news on the trade war front, putting the focus on Brexit.

Response on Brexit Extension Will be Important

The United Kingdom is waiting back to a request for an extension that it had to make on Saturday, after failing to ratify the latest agreed-upon Brexit deal.

There are two main scenarios when it comes to the extension. A long one which will likely accompany a general election in the UK, or a short technical extension that gives Parliament enough time to try and pass the current deal through.

A long extension to the end of January would bring out uncertainties and stands to remove some of the Brexit optimism seen in the markets at the moment. In such a scenario, I would expect Gold to break upward.

On the other hand, a short extension would boost confidence that Brexit will take place around the middle of November which stands to soften safe-haven demand and drive risky assets higher.

Gold Prices Hold Within a Triangle

XAUUSD Hourly Chart

For about two weeks, gold prices have traded within a narrowing range. A breakout appears imminent but a catalyst is likely required for one.

Aside from further political developments, the European Central Bank meets later today which also could provide some volatility.

However, policymakers are not expected to act after taking further easing measures at their last meeting.

A major support level to watch out for falls at $1479. This level has held the price of Gold higher for most of the month. In the event of a move lower below the lower bound of the triangle, a break of it would provide additional confirmation.

To the upside, the main hurdle remains at $1500, slightly above the upper bound of the triangle formation.